Couple Investing – When Should You Combine Accounts or Separate Them?

Daniel Penzing
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Checking Accounts

Because the nature of retirement planning with your spouse is so different from what you’ve done before, the typical approach to finances simply doesn’t make sense. If you’re single, of course you won’t have joint accounts, but as a married couple that is saving for retirement, you may want to reconsider the way you approach the management of your money.

Instead of keeping all of your accounts separate, you and your spouse can combine your accounts and open a joint account – a single account that you two can access and direct based on your individual needs and goals. There are many benefits to doing this, including eliminating tracking of expenses, simplifying the investment process, and reducing total expenses. Advocates of managing finances jointly believe that the only way to successfully meet long-term financial goals is to have one joint account for each long-term goal, which would include the retirement account and a tax-sheltered investment account.

The problem is that many couples disagree. Some believe that there’s no harm in maintaining separate accounts, keeping a buffer of liquid assets available in case of emergencies or just because you prefer to have the control over your assets.

Savings Accounts, CDs and Money Markets

For most couples, separate savings and investment accounts make more sense. Each partner should have their own accounts to help offset any resource squabbles that might arise between the partners. Each of you should also have your own credit cards … in fact, you are probably better off if you have separate cards, too. This kind of split is perfect for partners whose opinions regarding money and what you should be doing with it differ greatly.

If both partners are on the same page and only one of you will be handling all of the couple’s financial affairs, the best strategy is to have all of your assets, including money put aside for retirement, in a single joint account. This makes it easy for one partner to take care of the finances. Doing this also insures your retirement savings are not in two different accounts at the same bank and you don’t risk losing everything if one bank goes belly up.

Investment Accounts

When is the best moment to combine or separate accounts?

When we have a savings program, or even a list of goals, many times we feel the need to separate them by couples. To be clear, this won’t be a decision affecting the immediate future, and in fact it could happen with great serenity, without generating conflicts or problems.

This being said, in the end it may be that two different incomes and different financial objectives will take you in different possibilities. And no doubt that will exist ways to organize the systems further.

The Rule

Separate accounts should always be more solid than the one or the other. The truth is that in any case it is wise to separate those expenses that require greater priority.

The case of the house, for example, could be a priority for one or both couples, while the acquisition of a luxury car or similar could be the priority of only one.

Also, when it comes to different ways to organize an investment portfolio, many times we find that one of the couples may be inclined to take greater risks since it allows greater profitability in the short term.

In other words, we must think about future and mid-term plans; perhaps one couple will have greater obligations or more time in retirement while the other will have less. In this case it is best to have different profiles and objectives.

Retirement Accounts

The most common question about combining money – whether it’s a nest egg for retirement or a mutual fund in which either spouse has an interest – is whether the money is marital or separate property. After all, in most states, community property laws do not apply to retirement accounts like IRAs.

The general principle is something called an equitable division of property. Unless you have a prenuptial agreement, should you get a divorce, the court has the power to divide property equitably, based on what would be fair in the situation. That usually means an equal split.

The court can also allocate specific assets to an individual spouse, such as an inherited IRA or pension, even if he or she does not receive a share of the couples’ retirement account or retirement savings.

So, if there is a concern that a spouse might not treat a joint account as it should be treated, it’s often best for both spouses to each have their own account.

But that’s not necessarily the only option. There could be a couple of reasons to combine retirement accounts:

Business Accounts

Opening joint business accounts for spouses or partners can be a wise decision as it allows both spouses to use the account for business expenses. This eliminates the requirement to have multiple accounts that each spouse needs to account for on their tax returns.

Opening joint business accounts also ensures that there is enough money to properly conduct business transactions. This is especially true when dealing with large ticket items such as automobiles and furniture. The purchase of such items can have significant impact on the family budget and having the proper spending limits in place can avoid unexpected expenses and debt.

Joint business accounts should be used with care. The use of these accounts can lead to the creation of a common pot of money that both spouses can draw from. While this system works well for spouses that do not have access to traditional bank accounts, such as the spouse that lives overseas or the one who is still a student, it can lead to problems if one spouse is not responsible with money management or with trying to get credit.